Allowance method It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account. Ethics case: Company D’s current year net income appears to increase by 10%. But, Company D’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years. To identify: The stakeholders of Company D.

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Answer 1

Question

Chapter 8, Problem 8.7EYCT

(a)

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Company D’s current year net income appears to increase by 10%. But, Company D’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

To identify: The stakeholders of Company D.

(b)

To determine

To identify: Whether Company D’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

(c)

To determine

To describe: Whether controller has to concern about Company D’s growth rate in estimating the allowance for doubtful accounts.

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Answer 2

Question

Chapter 8, Problem 8.7EYCT

(a)

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Company D’s current year net income appears to increase by 10%. But, Company D’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

To identify: The stakeholders of Company D.

(b)

To determine

To identify: Whether Company D’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

(c)

To determine

To describe: Whether controller has to concern about Company D’s growth rate in estimating the allowance for doubtful accounts.

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Answer 3

Question

Chapter 8, Problem 8.7EYCT

(a)

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Company D’s current year net income appears to increase by 10%. But, Company D’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

To identify: The stakeholders of Company D.

(b)

To determine

To identify: Whether Company D’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

(c)

To determine

To describe: Whether controller has to concern about Company D’s growth rate in estimating the allowance for doubtful accounts.

Expert Solution & Answer

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Answer 4

Question

Chapter 8, Problem 8.7EYCT

(a)

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Company D’s current year net income appears to increase by 10%. But, Company D’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

To identify: The stakeholders of Company D.

(b)

To determine

To identify: Whether Company D’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

(c)

To determine

To describe: Whether controller has to concern about Company D’s growth rate in estimating the allowance for doubtful accounts.

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Answer 5

Chapter 8, Problem 8.7EYCT

(a)

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Company D’s current year net income appears to increase by 10%. But, Company D’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

To identify: The stakeholders of Company D.

(b)

To determine

To identify: Whether Company D’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

(c)

To determine

To describe: Whether controller has to concern about Company D’s growth rate in estimating the allowance for doubtful accounts.

Answer 6

Chapter 8, Problem 8.7EYCT

(a)

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Company D’s current year net income appears to increase by 10%. But, Company D’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

To identify: The stakeholders of Company D.

Answer 7

Chapter 8, Problem 8.7EYCT

(a)

To determine

Allowance method

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated, and recorded at the end of particular period. Under this method, bad debts expenses are estimated, and recorded prior to the occurrence of actual bad debt, in compliance with matching principle, by using the allowance for doubtful account.

Ethics case:

Company D’s current year net income appears to increase by 10%. But, Company D’s president suggests the controller to increase the percentage of allowance for doubtful accounts from the 2% to 4% in order to show the income growth rate to 6% from its present 10% and thinks that the reduced growth rate can be sustainable in future years.

To identify: The stakeholders of Company D.

Answer 8

(b)

To determine

To identify: Whether Company D’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

Answer 9

(b)

To determine

To identify: Whether Company D’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

Answer 10

(c)

To determine

To describe: Whether controller has to concern about Company D’s growth rate in estimating the allowance for doubtful accounts.

Answer 11

(c)

To determine

To describe: Whether controller has to concern about Company D’s growth rate in estimating the allowance for doubtful accounts.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 8 - Prob. 1Q Ch. 8 - Prob. 2Q Ch. 8 - Prob. 3Q Ch. 8 - Prob. 4Q Ch. 8 - Prob. 5Q Ch. 8 - Prob. 6Q Ch. 8 - Prob. 7Q Ch. 8 - Prob. 8Q Ch. 8 - Prob. 9Q Ch. 8 - Prob. 10Q

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To identify: Whether Company D’s president’s request of increasing allowance for doubtful accounts pose an ethical dilemma for the controller.

To describe: Whether controller has to concern about Company D’s growth rate in estimating the allowance for doubtful accounts.

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